Why Your Prius Will Bankrupt Our Highways
Gas taxes have funded our roads for decades. But our fuel-efficient cars and tax-allergic Congress are leading to an infrastructure break-down.
On Tuesday, House Republicans unveiled a highway spending bill stuffed full of red meat for their conservative base -- a Chipotle steak burrito wrapped in legislative language. It would bring the Keystone XL Pipeline back from the grave. It would gut funding for Amtrak and nix high-speed rail projects. And it would pay for its $260 billion price tag partly with royalties from expanded offshore oil drilling, including in Alaska's Arctic National Wildlife Refuge.
The drilling proposal alone probably makes this bill dead-on-arrival in the Democrat-controlled Senate. But even if it's a political non-starter, it also shines a big, bright light on a critical problem. America's old system for funding its highways is breaking down like an old jalopy, and no politicians have offered up a good solution to fix it.
HOW WE PAY FOR ROADS
This isn't a new problem, but it's getting worse. Since back in the Eisenhower era, the federal government has maintained a Highway Trust Fund, paid for mostly by taxes on fuel, that helps cover the repair and construction of our country's roads, bridges, and mass transit. The idea was that drivers themselves should bear some of the cost of the roads they used. Unfortunately, Congress hasn't raised the gas tax since 1993. Since then, inflation has eaten away at least a third of its value.
The issue first came to head in 2005, when Congress passed the last big transportation bill. At the time, legislators realized there wasn't enough money in the Highway Trust Fund to pay for all their new projects. So it covered some of the cost of the bill using its general fund, and tasked a commission with finding solutions to the longterm funding problem.
While the commission studied away, two new challenges emerged. First, Americans started caring about the fuel efficiency again, as skyrocketing oil prices ended the era of gas-guzzling SUVs. Then the recession struck, and penny-pinching drivers logged fewer miles to save on gas. Today, Americans are still using less fuel than they did just a few years ago. As a result, they're paying fewer gas taxes, and less money is flowing into the Highway Trust Fund, which is now facing potential insolvency in 2013, according to the Congressional Budget Office. The current House transportation bill would spend about $50 billion more than what the fund can pay for. A more modest Senate version would spend $12 billion more.
WARNING: GRIDLOCK AHEAD
But today's shortfalls are nothing compared to what's waiting down the road as cars become even more efficient. In 2009, the highway commission finally released its report, which included projections on what would happen to the trust fund as cars' average fuel economy rose. It included two scenarios, which it charted out in the graph below. In its "baseline forecast," it assumed the average gas mileage for cars and light trucks would rise to 31 miles per gallon by 2035. In the "conservative forecast," the commission assumed average fuel efficiency would rise to 45 MPG. Adjusting their projections for inflation -- shown via the lines in chartreuse -- the commission found that the real value of the trust fund would eventually drop by as much as 40%.
Bottom line: We can't keep relying on fuel taxes. In the future, they won't generate nearly enough money for Congress to spend like it can today. The graph below shows what the fund would be worth -- in green and blue -- and how much money the fund would need to maintain its purchasing power in 2008 dollars.
It gets worse. The White House has recently proposed fuel economy standards that are far more ambitious than anything the commission imagined. Again, their report assumed that cars and light trucks would average 45 mpg by 2035 at best. President Obama wants auto makers to increase their average fuel economy to 54.5 mpg by 2025.
If the current funding system is obsolete, how do we replace it? Transportation buffs have suggested moving to a system that charges motorists based on the number of miles they drive, rather than the gas they burn, since in a more fuel efficient world, gas is no longer a great proxy for highway use. Congestion pricing, which would charge motorists extra during peak hours, is also a popular idea. But so far, Congress hasn't shown too much interest. Instead, it seems to be casting around for sources of revenue, like oil royalties, that have nothing to do with how people actually use the country's transportation system.
That's a recipe for gridlock (literally), says Emil Frankel, a visiting scholar at the Bipartisan Policy Center who specializes in transportation. If people who use roads aren't forced to pay for them, there's little the government can do to limit the amount of driving, or the wear and tear that would require more repairs.
"You know the old line about the Soviet Union's bread lines?" he asked me. "When you give something away for free, the only way to ration it is long lines."